Analyzing the Local Economic Impacts of a Large Copper Mine: Including Both Benefits and Costs Thomas Michael Power Research Professor & Professor Emeritus.

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Presentation on theme: "Analyzing the Local Economic Impacts of a Large Copper Mine: Including Both Benefits and Costs Thomas Michael Power Research Professor & Professor Emeritus."— Presentation transcript:

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Analyzing the Local Economic Impacts of a Large Copper Mine: Including Both Benefits and Costs Thomas Michael Power Research Professor & Professor Emeritus Economics Department, University of Montana Power Consulting Missoula, Montana tom. power@mso.umt.edu

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The Attraction of Mining: An Offer Too Good to Be Refused? Concentrated wealth waiting to be extracted. High wage jobs. Tax revenues for local and state governments. Impact limited to relatively small mine site. Hard Times: Have to rebuild the areas economic base to escape the recession.

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Summary Response: A Guide to My Presentation Mining will not be an important part of Greater Tucson Area economic base in the future. Mineral deposits are not always wealth Mineral industry instability: booms & busts. Shrinking mining workforce: Technology. Significant environmental damage. That damage is not aesthetic. Its economic Recession is short-run; environmental- economic damage is long-run.

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Tucsons Highest Rankings as Economic Development Strengths 4. Cultural Diversity in the region. 6. Current image as a place for leisure, recreation, and entertainment. 7. Recreational & entertainment resources within the region. 8. Tucson regions current image as a place to live. 10. Art and cultural venues in the region.

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The Focus on Local Amenities Public educational institutions Cultural attractions Natural Landscapes and Recreation Opportunities Quality of Life: Lower key lifestyle Sunshine Urban amenities and access to even larger urban areas Close Proximity to Mexico

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Why the Focus on Amenities Instead of Traditional Exports? People care where they live. Businesses care where people live. Available high quality workforce Markets for the goods and services produced Attract high quality workers at lower cost. New residents setting up household stimulate the economy Attracting and Holding Retirees & Retirement income Attracting visitors: building a sustainable visitor economy Traditional exports do not explain local economic vitality.

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The Relative Importance of Rosemont Mine Projected Jobs Source of JobsDirect JobsMultiplier"Total"Percent of Total Pima UsedJobsCounty Jobs DirectTotal Rosemont Mine4065.2x2,1060.08%0.40% Pima County Travel Industry Jobs22,7701.5X34,8384.38%6.69% Total Pima County Jobs (2008)520,4441.0x520,444100.0% Relatively modest damage to the attractiveness of the region to new businesses, residents, retirees, or visitors could easily cancel out the benefits of the Rosemont mine.

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All Benefits, No Costs? No serious environmental damage, unlike any copper mine that went before it. Operation of the mine does not displace workers in any other businesses. Steady employment; no interruptions in pay, unlike any previous 20-30 yr. period.

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Instability in Mining Jobs Cycles of high prices stimulating production followed by over-supply, low prices and mine shut down. Labor-saving technological change allows production to rise while employment falls. Steady reduction in the mining work force required.

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Rational Thinking about Mining: Thinking Like a Mining Company Not all mineral deposits are developed as soon as they are discovered. NE Minnesota copper know for over a century. Still undeveloped. Rosemont copper was partially mined 1880s-1951, abandoned. Mining companies study the technologies available, the costs of extraction and processing, and the value of the final product. If costs are greater than the value produced justifies, the mineral deposit does not get developed.

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Rational Thinking about Mines The public and regulatory agencies should take the same perspective, but from a public cost and public benefit point of view. Do the benefits justify the costs? If not, the public should do the same thing a mining company would do, not allow public resources to be invested in the development of the mineral deposit.

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Rejecting a Particular Mine Is Not Evidence of Being Anti-Mining Mining companies regularly reject proposed mineral developments because costs exceed revenue expectations. We will not go with out copper if a costly mine is rejected. We will turn to a less costly alternative. Hundreds of copper deposits are proposed for development. Consider the current revival of copper mining activity across Arizona, North America, and around the world.

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Rational Mine Site Selection Location: Sensitive area? Other values dominate? Technology being used: Size and extent of foot print; ease of mitigation and complete reclamation? Past history of copper mining is important. Did it lead to prosperous, stable, vital economies? Was the natural environments left intact? What have been the costs to the public of repairing damage?

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Conclusions-1 Be rational: look at both benefits and costs Dont be panicked by the recession. Mines do not cure recessions. Recessions are 1 to 2 year cycles; mines operate 20 to 30 years with their own deep cycles. Take into account the instability that characterizes mineral development. Arizona has plenty of experience with that. Realize there are lots of alternative sources of copper. High-tech and alternative energy will not be stalled by rejecting high cost copper deposits.

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Conclusions-2 Recognize that Tucson is not a frontier economy. It is a sophisticated high-tech manufacturing and service economy with a bright future. You are not desperate beggars; You can afford to be good choosers who seek to preserve what is most valuable about this place you call home. Natural landscape amenities are an important part of the Tucson areas economic base. This is not just an aesthetic or pretty playground concern. It is a dominant economic concern.